Financial Services Bill

Part of the debate – in a Public Bill Committee at 12:00 pm on 10 December 2009.

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Angela Knight: If I refer you to the Bill itself, clause 26 on section 404 states that the provision will apply if it appears to the FSA that,

“as a result, consumers have suffered (or may suffer) loss or damage in respect of which, if they brought legal proceedings, a remedy or relief would be available in the proceedings”.

What that is saying is that the FSA—the authority—is making an assumption about what would be the outcome of a legal process. Frankly, you cannot do that. There is either a legal process and decision, or there is not a legal decision. In other words, you might say that what that clause is giving to the FSA is the ability to act as prosecution, judge, jury and so on.

There is always judicial review, but judicial review as a check and balance in a system is a backstop—it cannot be part and parcel of a normal process. The clause notes that the provision applies if it “appears” to the FSA, but if it does not appear to the industry that it has to go to judicial review, or if the FSA decides that there is not a 404 issue, the consumers will say, “We don’t think that’s right,” and if they cannot do a judicial review here, they will go up the collective redress system. All we are doing is providing a greater degree of uncertainty that we feel is of very serious concern.

We therefore propose to bring a court involvement in at a very early stage. Not all courts take years and years, and we already have examples in the UK. In insolvency, for example, a scheme is put to a court, which decides on the basis of that scheme. If there is going to be a revision of section 404, broadly in the context envisaged by the Bill, we need to have the certainty of what the legal position is, which means an early involvement of the court so that decisions are not subsequently challenged. Secondly, there also needs to be some mechanism before we even get to that court for deciding what the issues that the FSA is seeking to address are.